Question

During the coronavirus pandemic, global supply chain issues caused the supply of new cars to shift left. What role did price play in the new car market?

a) Elasticity
b) Excess demand
c) Excess supply
d) Rationing device

Answer 1

The role of price in the new car market during the coronavirus pandemic was to act as a rationing device, determining which consumers were able to purchase the limited supply of new cars.

Step-by-step explanation:

During the coronavirus pandemic, global supply chain issues caused the supply of new cars to shift left. This means that the supply of new cars decreased due to disruptions in the production and distribution processes. In the new car market, the role of price was to act as a rationing device, determining which consumers were willing and able to pay the higher prices for the limited supply of new cars. Since the supply was limited, prices increased and only those who could afford the higher prices were able to purchase new cars.